29/01/2008

Futures analysis

Yesterday I stated, that the futures returned to the downtrend, as daily candle exceeded two previous lows, indicating that more sellers are coming back. Today, the market gapped up in the morning, which shifted the short term trend to the upside and resulted in full retracement of the whole recent downside move from 3030 (including gap fill). Basically we are now having a retest of crucial resistance area, preceeded by a higher low. If the price breaks through this area and maintains its strength, then we would probably have extended pullback towards the declining 20-day moving average, which is nearing another key resistance - March low, 3125. I was recently pointing out, that the whole rally is taking place on light volume, which rather does not indicate any relative strength here (theoretically). However, price is the ultimate indicator, so that higher low may prove to be a good point to initiate more upside action. Again, everything depends on the close of american indexes, as it did especially today. When futures test important price levels, psychology means the most, even when it comes to neglect technical factors.

Yesterday's +1% close of american indexes resulted in an upside gap here in WIG20 futures, which confirmed short term trend change. The global markets are still betting, that expected rate cut by the Fed will spur growth in american economy. This may be a short term catalyst, that may cause stock markets to post longer rallies and it probably will act as such. The question remains: how the interbank rates are going to behave in relation to their nominal counterparts? Because, higher market borrowing cost may slow down economic growth anyway, so I would rather look at the results of recent fiscal stimulus policy. As you can see, the second rate cut may finally be 'noticed' by the markets, resulting in further upside action. As for WIG20 futures, looking at the intraday timeframe, the closest price target appears to be previously mentioned 3030-50 resistance zone. Price showed some buying evidence today, as it remained above the short term moving averages for the whole session. As I said earlier - there has to be a sustained move above this resistance area, if we are to see intermediate trend reversal.